Obamacare: It’s a Bittersweet Subsidy

"Even the administration is having a terrible time spinning this law," Senate Republican Leader Mitch McConnell said about Obamacare. "About the best they could claim was that some premiums would be lower than projected. Note that I didn't say lower, but lower than projected."

This week, the Department of Health and Human Services (HHS) released a 15-page red herring—I mean report—which effectively avoided answering the question it was supposed to answer: How expensive will the insurance premiums under the exchanges be compared to premiums for today’s insurance plans?

“Premiums nationwide will be more than 16 percent lower than projected,” the HHS beams in a press release, as if this number means anything to anyone.

“There are literally no comparisons to current rates,” former Congressional Budget Office director Douglas Holtz-Eakin contends, “that is, HHS has chosen to dodge the question of whose rates are going up, and how much. Instead they try to distract with a comparison to a hypothetical number that has nothing to do with the actual experience of real people.”

The Manhattan Institute took up HHS’s buried baton and exhumed the ugly answer. Twenty-seven-year-olds will face rate increases as high as 279 percent. Rates will go up 97 percent for men and 55 percent for women. Unexpectedly, 40-year-olds will also incur higher costs—99 percent more for men and 62 percent for women. The reason men will see dramatically higher cost increases is because under the old system, men generally paid a lot less than women.

"But wait," the government says, "consumers who earn up to 400 percent of the federal poverty level will qualify for subsidies." Yet the Manhattan Institute found that these bittersweet subsidies won’t counteract rate shock for most people.

In essence, they discovered that “most people with average incomes will pay more under Obamacare for individually-purchased insurance than they did before.” In this way, Obamacare is a kidney punch to the middle class, the sector of the population that Obama seeks to uplift. The average premium will total $3,000 a year and many Americans will have to choose between a handful of insurers—in some states, just two.

To add misery to injury, this week Home Depot dumped 20,000 part-time employees into the health insurance exchanges, effectively dooming many of them to higher premiums. “Unfortunately, the ACA precludes us from offering the limited liability medical plan we’ve been offering the part-time associates,” according to Stephen Holmes, Home Depot spokesperson. This follows last week's announcement that Walgreens is dropping coverage for all of its 180,000 employees.

Forbes points out that many more companies are likely to follow suit in response to these new perverse market incentives:

“Employers, whose finance personnel are usually pretty good at math, are realizing that they can save a bunch of money if they (1) stop providing health care to their employees, (2) push their employees to the federal insurance exchanges, and (3) pay the per employee ‘tax.’”

Dan Liljenquist, a former candidate for senator, believes as much as 10 times as many companies as predicted will shift employees to the exchanges, resulting in trillions of dollars in expenses on the already cumbersome federal balance sheet:

“Americans will soon find themselves “shopping” for health insurance in a market where every product is nearly identical and every price resolves towards the mean. The next step will be a government insurance option.”

More than two thirds of the underinsured are under the age of 40, meaning most Americans will suffer rate hikes and have fewer health care options. Thus, calling the new health care law “The Affordable Care Act” is as insincere as calling Bashar al-Assad a saint. The opening of the healthcare exchanges on October 1 is the first checkpoint on the slippery slope to single-payer healthcare.

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